Brent holds above $110

15 May 2014, News Wires – Brent crude held above $110 a barrel on Thursday near the highest in nearly three weeks as on-going concerns over the crisis in Ukraine outweighed mixed US oil inventory data.

The exclusion of pro-Moscow separatists from talks among Ukraine’s interim leaders on plans to give the eastern regions greater autonomy ahead of presidential elections on 25 May cast doubt over whether the move could defuse the political crisis.

Energy ministers from Russia and the European Union are also due to meet in Berlin on 19 May to agree a schedule for another round of talks with Ukraine to end a dispute over gas prices and supplies and avoid a potential “gas war”. Russia also said it is ready to discuss gas supplies to Ukraine if it pays part of its $4 billion gas debt.

“Geopolitical fears are a key factor at least for Brent. Given the environment, you are not yet going to see a declaration of peace,” said Michael McCarthy, chief market strategist for CMC Markets in Sydney.

There was potential for supply disruptions just as energy demand increased in the northern summer, he said. Half of Europe’s imports of Russian natural gas go through Ukraine.

Brent crude for June delivery dropped 11 cents to $110.08 a barrel early on Thursday, down from $110.19 in the previous session, the highest settlement since 24 April. The June contract expires on Thursday.

US oil was down 30 cents at $102.07 a barrel after closing 67 cents higher at $102.37, its highest closing price since 21 April.

Brent could rise to $115-118 a barrel by the end of next week, while US crude could climb to $106 a barrel, McCarthy said.

Prices were driven higher in the previous session after weekly data from the US Department of Energy’s Energy Information Administration showed stocks at the key Cushing, Oklahoma, delivery hub fell by 592,000 barrels in the week to 9 May.

Asian investors, though, are instead looking at the overall build in US crude inventories causing oil prices to fall in trading on Thursday, said Jonathan Barratt, chief executive of commodity research firm Barratt Bulletin in Sydney.

US crude inventories rose 947,000 barrels to 398.5 million barrels last week, as production hit a 28-year high of 8.43 million barrels, the EIA said on Wednesday.

Analysts had expected US crude inventories to fall by 100,000 barrels.

A build of 2.3 million barrels to a record high of 215.7 million barrels on the US Gulf Coast helped drive the overall increase in inventories, the EIA said.